Bankruptcy filings in Buffalo rise 2.7%

There were 1,284 filings last year, compared to 1,250 in 2022, according to the U.S. Bankruptcy Court’s Western District.

A combination of factors contributed to the increase in commercial and consumer cases, although higher interest rates were a common denominator in both types of bankruptcies, said Raymond Fink, a partner with the Lippes Mathias law firm.

“The rates were being ratcheted up consistently over the last couple of years,” before the Federal Reserve paused hikes at the end of 2023, Fink said.

Those rate hikes have had a “domino effect” on individuals carrying credit card balances or variable rate mortgage loans, he said.

Had those interest rates been increased gradually in recent years, Fink said, “there’s a better opportunity for people to adjust and manage.”

Noelle Carter, president and CEO of Parachute Credit Counseling, also sees a mix of factors leading to the rise in bankruptcy filings.

“In terms of unsecured debt, we are seeing people with higher levels of debt, which, coupled with higher interest rates, stagnant wages and inflation, makes it such where people are unable to maintain afloat,” she said.

When the pandemic struck the economy in 2020, unemployment soared, but bankruptcy filings kept falling. That was partly due to public funds distributed to help individuals and small business owners survive the pandemic and related shutdowns. Those funds served as a financial cushion through the turmoil.

But those funds have since been spent down and gone away. “That’s been burned through,” Fink said. “Now they have to be self-sustaining without that government support.”

Fink said he is keeping a close eye on the commercial real estate market, which is still adjusting to post-pandemic changes in the workplace.

Retail properties have already gone through such a shakeout, as consumers’ shopping patterns have changed. Tenants of office properties are determining how much office space they need in the long run – with so many of their employees working remotely or on hybrid schedules – and the owners of those buildings will absorb the consequences.

“I think there’s going to be a very noticeable trend in insolvencies with certain kinds of commercial real estate,” he said. Not all of those situations will necessarily turn into bankruptcy filings, he added.

Even with the year-over-year increase, the number of bankruptcy cases filed in Buffalo remains low compared to recent history. Ten years ago, the total was 3,632. And 15 years ago, the figure was 5,748.

Nationally, commercial bankruptcy filings increased 19% from a year earlier, while consumer filings were up 18%, according to Epiq AACER, a provider of bankruptcy filing data.

“Though still below pre-pandemic figures, bankruptcies in all filing categories climbed last year amid the evaporation of pandemic emergency responses, increased interest rates and tougher lending standards,” said Amy Quackenboss, executive director of the American Bankruptcy Institute.

Look for higher filing totals this year, as well, said Michael Hunter, vice president of Epiq AACER.

“We expect the increase in number of consumer and commercial filers seeking bankruptcy protection to continue in 2024 given the runoff of pandemic stimulus, increased cost of funds, higher interest rates, rising delinquency rates, and near historic levels of household debt,” he said on the company’s website.